With markets opening sharply higher on Monday, with December corn futures closing more than 9 cents higher at $4.40, Joe Vaclavik of Standard Grain sees weather concerns at work.
I think it’s safe to say that weather market 2016 has officially begun,” he said, noting how the latest weather forecasts are starting to move toward a hotter, drier outlook. “They’re calling for less rain in the central and eastern portions of the Corn Belt. Those areas are going to see rain in the next three or four days,” he added, “but everything beyond that continue to look very warm and pretty dry for a lot of the Corn Belt.”
(Click here to listen to Vaclavik's full audio commentary.)
Those weather concerns are attracting the attention of more than just farmers. The funds, facing few good opportunities for their investments, are pouring money into commodities.
“There’s something to be said for what is going on in commodity markets as a whole,” Vaclavik explained. “Bloomberg’s commodity index (last week) posted the largest weekly close since October.
We’ve got a lot of money looking for a home. We’ve got negative interest rates in a lot of countries overseas, we’ve got rates essentially near zero here in the United States, and commodities as an asset class have been performing very well. I think any little excuse, whether it’s a weather market or demand-based, (will make funds) very interested in owning these commodities.”
He added that according to Friday’s commitment of traders, managed money is now long 224,000 contracts. “That’s the biggest long position since July of last year, when we had that little weather scare,” Vaclavik said.
Do you think the weather market has begun? Let us know in the comments.